K & V Scientific Co., Inc. v. Bayerische Motoren

Decision Date23 December 2002
Docket NumberNo. 02-2020.,02-2020.
PartiesK & V SCIENTIFIC CO., INC., a New Mexico corporation, Plaintiff-Appellant, v. BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT ("BMW"), a corporation organized and existing under the laws of Germany, Defendant-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

John W. Boyd (David A. Freedman with him on the brief), Freedman Boyd Daniels Hollander Goldberg & Cline P.A., Albuquerque, NM, for the appellant.

Edward Ricco (Travis R. Collier and James P. Bieg with him on the brief), Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, for the appellee.

Before HENRY, PORFILIO, and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff K & V Scientific Co., Inc., appeals the district court's grant of defendant Bayerische Motoren Werke Aktiengesellschaft's motion to dismiss for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). We exercise jurisdiction pursuant to 28 U.S.C. § 1291, and reverse and remand for further proceedings.


Plaintiff is a New Mexico corporation with its principal place of business in Los Alamos, New Mexico. Plaintiff is "engaged in development and commercialization of advanced technology products and processes," including "automotive safety product engineering." App. at 8. Alan Kammerman, who along with his wife Rosalie owns plaintiff, "is an engineer and scientist" who specializes "in marrying sophisticated technologies for new applications." Id.

In 1995, plaintiff began "developing concepts for advanced automotive safety systems, including ... the use of semiconductor bridge technology as the foundation for `smart' systems for triggering air bags."1 Id. at 11. The semiconductor bridge technology was first developed by Sandia Laboratories for use in certain defense programs, and was subsequently transferred to SCB Technologies, Inc. (SCBT), a corporation formed for the purpose of commercializing the technology. In early 1996, SCBT, its sister company The Ensign-Bickford Company, and its parent corporation Ensign-Bickford Industries, Inc., entered into agreements with plaintiff, pursuant to which the three companies "encouraged [plaintiff] to pursue relationships with the auto industry and agreed ... to protect [plaintiff's] work-product."2 Id. at 11-12.

In 1996, plaintiff contacted defendant, a German corporation based in Munich and engaged in the design and manufacture of automobiles. Defendant expressed interest in the igniter technology. On July 8, 1996, plaintiff and defendant signed a confidential disclosure agreement to allow them to "evaluat[e] the ... technology for potential implementation in vehicles manufactured by [defendant]." Id. at 30. After entering into the agreement, the parties began disclosing confidential information to each other so they could explore the possibility of using the igniter technology in defendant's air bag systems. Further, in November 1996, the parties met in Munich and agreed that plaintiff would "design for [defendant's] `next generation' air bag system[s]." Id. at 13. At the same time, plaintiff and defendant "agreed on a schedule for development and manufacture extending into the year 2005." Id.

On January 27, 1997, without any prior discussion or solicitation, defendant mailed plaintiff a new confidentiality agreement signed by an authorized representative of defendant. The stated purpose of the new agreement was to allow the parties "to exchange confidential information" regarding a "Squib for Airbag," and to "avoid any misuse of such information." Id. at 33. Unlike the July 1996 agreement, the new agreement contained a jurisdictional and choice of law provision which stated: "Jurisdiction for all and any disputes arising out of or in connection with this agreement is Munich. All and any disputes arising out of or in connection with this agreement are subject to the laws of the Federal Republic of Germany." Id. at 34. Plaintiff signed the agreement on February 4, 1997.

After the new agreement was signed, defendant allegedly requested that plaintiff proceed with the igniter design and allegedly reassured plaintiff that, assuming defendant used the technology for its air bag system, the parties would then work out the financial details of their relationship. Plaintiff continued its development work and ultimately provided defendant "with a series of sophisticated designs for interfacing a semiconductor bridge igniter with [defendant's] air bag systems needs." Id. at 14.

Further communication between plaintiff and defendant followed, including another meeting in Munich. Plaintiff alleges that following that meeting, defendant asked plaintiff to "make an offer for development and production of a new air bag igniter." Id. at 15. In response, plaintiff "expressed a willingness either to appropriately license the necessary technology from SCBT, or to become partners with SCBT and The Ensign-Bickford Company and its parent corporation, in pursuing the BMW opportunity." Id. Ensign-Bickford, however, "insisted that [plaintiff] not submit any pricing proposal to [defendant] that Ensign-Bickford had not approved." Id.

Although plaintiff alleges it made a number of proposals to Ensign-Bickford in 1997, no agreement was reached. In September 1997, defendant contacted plaintiff "and finally informed [plaintiff] that [defendant] did not intend to pursue any business activities with [plaintiff]." Id. at 19. Plaintiff alleges that defendant, Ensign-Bickford and SCBT then proceeded to engage "in the development and manufacture of the `next-generation' air bag igniter system that [plaintiff] designed and promoted."3 Id. at 20. To date, plaintiff has received no compensation from defendant for its development work.

Plaintiff filed suit against defendant in New Mexico state court, asserting claims for (1) breach of the July 8, 1996, confidential disclosure agreement, (2) breach of the February 4, 1997, confidentiality agreement, (3) breach of the duty of good faith and fair dealing, (4) unjust enrichment/quantum meruit, (5) violation of New Mexico's Trade Secrets Act, (6) violation of New Mexico's Unfair Trade Practices Act, (7) estoppel to deny partnership and breach of partnership agreement, (8) fraud, and (9) breach of fiduciary duty. Defendant removed the case to federal court and moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and (3) for lack of personal jurisdiction and improper venue. The district court granted defendant's motion to dismiss for improper venue. In doing so, the district court concluded that the forum selection clause contained in the February 4, 1997, confidentiality agreement was "unambiguous and enforceable," and demonstrated "[t]he parties' intent to locate jurisdiction for this action solely in the courts of Munich." Id. at 392.


On appeal, plaintiff asserts the district court erred in dismissing its complaint for improper venue. In particular, plaintiff disputes the district court's conclusion that the forum selection clause contained in the February 4, 1997, confidentiality agreement mandates that any litigation between the parties be conducted exclusively in Munich, Germany. According to plaintiff, "[t]he language of the clause at issue ... contains no reference to venue, contains no language designating the courts of Munich exclusive, and contains no language indicating that suit elsewhere is impermissible." Aplt. Br. at 16. Plaintiff further notes that defendant drafted the confidentiality agreement in general, and the forum selection clause in particular, and therefore the clause must be construed against defendant if it is deemed ambiguous.

"A motion to dismiss based on a forum selection clause frequently is analyzed as a motion to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3)." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 956 (10th Cir.1992). "The enforceability of [a] forum selection" clause is a "question[] of law which we review de novo."4 Id.; see also Excell, Inc. v. Sterling Boiler & Mech., Inc., 106 F.3d 318, 320 (10th Cir.1997) (noting that de novo review is appropriate because the issue turns on an analysis of the language of a contractual clause); SBKC Serv. Corp. v. 1111 Prospect Partners, L.P., 105 F.3d 578, 581 (10th Cir.1997) (holding that "construing the clause is a matter of contract interpretation that we review de novo").

Plaintiff does not dispute the general validity of the forum selection clause contained in the parties' February 4, 1997, confidentiality agreement. See generally M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (holding that forum selection clauses contained in international arms-length contracts are considered to be prima facie valid); Riley, 969 F.2d at 957 ("When an agreement is truly international, as here, and reflects numerous contacts with the foreign forum, the Supreme Court has quite clearly held that the parties' choice of law and forum selection provisions will be given effect."). Instead, plaintiff contends that the forum selection clause at issue is permissive, rather than mandatory, and therefore does not require litigation in Munich. See Citro Florida, Inc. v. Citrovale, S.A., 760 F.2d 1231, 1232 (11th Cir.1985) (noting that "[t]he Bremen court did not reach the distinctions between mere `consent to jurisdiction' clauses and `mandatory' clauses").

This court and others have "frequently classified" forum selection clauses "as either mandatory or permissive." Excell, 106 F.3d at 321. "Mandatory forum selection clauses contain clear language showing that jurisdiction is appropriate only in the designated forum." Id. (internal quotations omitted). "In contrast, permissive forum selection clauses authorize jurisdiction in a designated forum, but do not prohibit litigation elsewhere." Id. (internal quotations omitted).

In addressing the mandatory/permissive issue, the district court concluded there was "a distinct lack of cohesion among"...

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